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Eckerd Pharmacy

Beginning this month, Brooks is sending a new message to Eckerd shoppers through a revamped weekly circular. Previously, a heavy focus on consumables advertised at rock-bottom prices drove traffic--and discount shoppers-into Eckerd stores. Brooks now has assigned itself the immediate task of overhauling circulars, cutting out highly promotional, commodity-driven pricing strategies and instead is concentrating on everyday low prices for health and beauty items traditionally associated with the drug store channel.

Proof positive Brooks is putting its money where its mouth is: 80 percent of Eckerd's advertising budget is earmarked for the weekly circulars, which reach an estimated 20 million homes.

"We're going back and questioning why is this item priced this way? Why do we have a coupon here? We're trying to bring [the circular] back to what I call a competitive drug store circular," said David Morocco, senior vice president of marketing for Brooks.

The word "pharmacy" now will appear on the circular after the Eckerd name, replacing the "Get More" banner previously positioned under the logo. It may be yet most telling change to the circular under Brooks' direction.

Brooks executives are betting that the change will serve as a wake-up call for shoppers who had cherry-picked their local Eckerd stores for having the lowest prices in town for a 12-pack of Coke, but who'd skipped the over-the-counter aisle on the way to the checkout stand.

Updating the weekly circulars has been one of Brooks' top priorities in the weeks since the close of the deal that made it an 1,800-store chain. It is part and parcel of a larger challenge that will be a critical factor in Brooks' ability to turn business around in the Eckerd stores and to correct a very flawed pricing and promotional strategy. The problem isn't with attracting customers to the stores. It's with getting them to buy the right items--the kind that keep drug stores in business--when they come.

On Sept. 5, the first wave of new Eckerd circulars hit Sunday papers and touched down in retail locations. And while food has not been, nor will it be, eliminated from Eckerd's retail mix, it will be de-emphasized in its circulars.

"The big focus [at Eckerd] the last few years has been highly promotional on consumable items-soda, chips, food, household chemicals and paper goods," said Brooks-Eckerd president and chief executive officer Michel Coutu. "Eckerd opened up a huge aisle in the store where they could move in products by the palette and really promote them. And then they gave away the goods to drive traffic. This can work if it isn't done at the expense of anything else, but we believe it was done at the expense of pharmacy and OTC."

For instance, Eckerd's rock-bottom prices on items like 12-packs of Pepsi, promoted in its circular for the week of Oct. 12 at four for $9, left consumers walking out the door with their arms full of soda, but with little if any room to carry much else. As a result, some Eckerd stores were selling as many as 1,000 cases of warm soda per week, a strategy that succeeded in bringing in customers, but not in generating substantial cash flow.

A fresh focus in the weekly flyers will concentrate on programs that beef up the bottom line and play to some of Eckerd's notable strengths--namely, beauty. "On the front page of our circulars, you are going to see really strong prices on health and beauty. Why? Because we want to be a destination for that customer," said Coutu. While the strategy may put

Brooks at risk of alienating some of the core Eckerd shoppers, Dave Wendland, vice president of the Hamaeher Resource Group, said, "My gut tells me [the revamped circulars] are going to attract a much more valuable customer in the long run."

That includes weeding out some of the cherry pickers. Eckerd's marketing strategy of high everyday prices and deep discounts resulted in customers shopping the store for items not traditionally associated with the drug store channel. While a natural blurring of the lines among the grocery, drug, mass and discount markets is a fact of the times, there comes a point where management must decide either to remain true to its core business or to transition into another enterprise.

"Companies have a DNA molecule and it's usually started by the founder," said Tim Lazor, president of Lazor/Yost Marketing & Design in Pittsburgh. "A lot of times it gets buried, hidden or fogged up."

Brooks is looking to unearth what it may consider a buried treasure by moving Eckerd back to its core roots in pharmacy, started by founder Jack Eckerd.

In addition to emphasizing pharmacy first in its weekly circulars, Brooks will institute other meaningful changes inside the store that add value and ease to the entire Eckerd shopping experience.

"As a shopper, I can't figure out what's on sale or not in a lot of Eckerd stores," said Morocco. "Too many of the signs are yellow. Too many of the signs look alike. If we put a sign out, it's ]going to be] meaningful to the customer."

A tour of Brooks' stores in southern Connecticut unveiled a significant amount and variety of in-store signage, offering a them glimpse of what may be in the works for Eckerd-signs affixed to end-caps, popping shelf-talkers and more overhead messaging touting "Gift Buys," "Great Buys," "Seasonal Buys," "Brooks Value," "Manager's Special" and "Great Savings with Brooks' Brands." One sign proclaiming clearance items at 50 percent off told customers: "Quality items are being discontinued."

Some Brooks stores also post blown-up copies of weekly circulars in their windows so customers can see the weekly sale items when walking from the parking lot into the main entrance.

But paramount to Eckerd's success is making sure that when customers walk in the door, the products they want are on the shelf.

"[With the new flyers], every week we are inviting all of these people into our stores," said Morocco. "We're going to make sure there's a sign on the product telling the customer that this is the sale item, and we're going to satisfy that customer's basic need."

To that end, Brooks likely will instill its promise of "breaking price barriers every day" into the Eckerd pricing model. Through its own research, Brooks found that customers are looking for fair prices. "Eckerd at one time had a reputation for high prices," said Morocco. "But there's a way to manage prices so you can keep the margin you need to keep."

Brooks should find a happy medium with its pricing structure for Eckerd that fits current trends in the marketplace. What it will not continue to do is play the high-low game in the wrong order for a drug store (i.e., too low on consumables; too high on health and beauty).

Analysts predict the new approach will make for a more disciplined pricing environment. "With [The Jean Coutu Group] aiming for a margin improvement as part of its turnaround strategy for the Eckerd acquisition, we expect to see front-end pricing and promotion strategies more in line with industry norms, everyday prices in line with competitors and less aggressive discounts on promotional items," noted Morgan Stanley analyst Mark Wiltamuth.

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